Ministers are to order a major crackdown on the workshy by extending
back-to-work schemes despite judges deciding that the rules behind the
programmes are unlawful.

Iain Duncan Smith, the Work and Pensions Secretary, is said to have been left “frustrated” after Cait Reilly, a university graduate, won a Court of Appeal claim that requiring her to work for free at a Poundland discount store was unlawful.

Senior Government sources have labelled the court’s decision as “odd” and said they want to toughen up the rules despite the criticism from the judiciary.

Ministers are now expected to in the coming weeks outline plans to extend the use of sanctions and mandatory work for the unemployed.

Miss Reilly, 24, from Birmingham, and Jamieson Wilson, a 40-year-old unemployed HGV driver from Nottingham, both succeeded in their claims that the unpaid schemes were legally flawed.

Three judges ruled that the Department for Work and Pension (DWP) had acted unlawfully by not telling unemployed people enough about the penalties they faced if they refused to take part in the compulsory work programmes.

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However, the judges conceded that the programmes do not breach people’s human rights.

The Government expressed “disappointment and surprise” at the decision but immediately introduced new regulations to ensure that the work schemes can continue despite the ruling.

Officials are expected to appeal to the Supreme Court against the decision.

Miss Reilly’s solicitor claimed that the ruling meant that thousands of unemployed people who have had their jobseekers’ allowance withdrawn for non-compliance with the back-to-work schemes could now be entitled to reclaim their benefits.

A spokesman for the Department of Work and Pensions said they have “no intention of giving back money to anyone who has had their benefits removed because they refused to take getting into work seriously”.

Miss Reilly had been claiming jobseekers’ benefits since 2011 after she failed to find work after graduating in 2010.

In November 2011, she had to leave her voluntary work at a local museum and work unpaid at the Poundland store in Kings Heath, Birmingham, under a scheme known as the “sector-based work academy”.

She was told that if she did not carry out the work placement she would lose her jobseeker's allowance.

Miss Reilly complained that she was made to work at the budget retail store and complete “menial tasks” such as sweeping the floors and stocking shelves.

Mr Wilson, a qualified mechanic, was told that he had to work unpaid, cleaning furniture for 30 hours a week for six months, under a scheme known as the Community Action Programme.

He refused to participate and as a result was stripped of his jobseeker's allowance for six months.

After the ruling Public Interest Lawyers, who represent Ms Reilly and Mr Wilson, said the Court of Appeal's unanimous decision was a "huge setback” for the DWP.

However, a senior Government source said ministers will press ahead with the work programmes.

“We want to increase the use of mandatory activity and sanctions for the unemployed as the schemes work,” the source said.

“We are studying where the schemes can be extended and will make an announcement within weeks.

“The short, sharp shock is usually enough to get the work-shy back into employment so the plan is to extend the practice, not retreat in the wake of this odd court decision.”